By Megan R. Wilson - 07/23/13 12:40 AM EDT
K Street is getting its mojo back.
After a disastrous first quarter of falling revenue, most lobby firms saw an uptick in the spring and early summer as Congress made moves on issues like immigration and tax reform.
“This town is slowly coming back,” said Smitty Davis, a partner at Akin Gump Strauss Hauer & Feld, Washington’s No. 2 lobbying firm by revenue.
Akin Gump, which took in $8.6 million in the second quarter, is one of the rare firms where profits rose by every metric: Revenue jumped 9 percent over the first three months of the year, and 11 percent when compared to the second quarter of 2012.
Lobbyists attributed the bounce back from the winter months — a slow period that many described as “hangover” from the fiscal-cliff fight — to a growing sense that collaborative legislating is again possible in Congress.
“A lot of clients had taken a step back” in 2012 as legislating gave way to campaign messaging, said Kevin O’Neill, the deputy chairman of Patton Boggs’s public policy department.
Now, with movement on issues like immigration, tax reform and the online sales tax, “you’re starting to see some bipartisan compromise,” O’Neill said, adding that the nature of those efforts are more likely to engage the business community.
Of the top 10 lobby firms that submitted information to The Hill, eight had increases in revenue over the first three months of 2013.
Patton Boggs remained king of K Street, taking in about $10.9 million in lobbying revenue, good enough for a 4 percent increase over the first quarter, even as overall yearly revenue at the firm remained depressed from last year.
“We may be seeing some green shoots of a sustained lobbying recovery,” O’Neill said.
O’Neill said the push in Congress for tax reform legislation — which would have a direct impact on business profits nationwide — has made corporate America eager for lobbying help.
“Comprehensive tax reform is like a tractor beam pulling corporations into Washington,” O’Neill said.
“Whereas early in the year, a corporation could be forgiven for brushing off the chances of comprehensive tax reform gathering momentum, the work of [Sen.] Max Baucus [D-Mont.] and [Rep.] Dave Camp [R-Mich.] in the last quarter has made it clear that standing on the sidelines as the debate unfolds is a much bigger risk to your interests than doing nothing at all.”
Tax reform has been particularly good to Capitol Counsel, a firm with a major tax practice. It earned $3.5 million in the second quarter, a 25 percent increase over the $2.8 million haul in the second quarter of 2012.
Capitol Counsel founder John D. Raffaelli said the jockeying over tax breaks and deductions — combined with under-the-radar issues like patent reform, transportation spending and airline safety — has the firm positioned to ride high through the remainder of 2013.
“There are a lot of issues that people have forgotten about,” Raffaelli said.
Ernst & Young, another tax-heavy shop, saw a revenue increase, earning about $3 million in the last three months. It made $2.8 million during 2012’s second quarter.
Another K Street heavyweight, Van Scoyoc Associates, had an increase of 19 percent from the first quarter, making $5.6 million. The firm said clients are waking up to the nation’s new budget reality and adjusting their lobbying accordingly.
“People realize that a lot of things aren’t going to change [in the budget], and it’s a very, very competitive environment [for grants and contracts],” said Stu Van Scoyoc, the firm’s leader. “[Clients realize] they better get in there and compete as aggressively as they possibly can.”
Van Scoyoc said the shop’s consulting arm, which is not reported under the Lobbying Disclosure Act, is seeing a boom as well as clients seek advice on how to navigate the federal contracting process.
The Podesta Group, which has seen huge growth during President Obama’s time in the Oval Office, pulled down second-quarter revenue of about $7 million. That’s a 6 percent increase over last quarter, but a 2 percent decrease from the same period last year.
Things are also looking up at Hogan Lovells, which had a 24 percent increase from the first part of 2013 with earnings of $3.5 million in the second quarter.
Brownstein Hyatt Farber Schreck, a top 10 firm, signed 16 new federal lobbying clients last quarter, according to Al Mottur, the firm’s managing partner. Its revenue remained fairly stable at $5.4 million, not changing much from the first three months of the year and declining by less than 1 percent from the same period last year.
Cassidy & Associates, meanwhile, saw second-quarter earnings of $3.1 million for the second quarter, about the same as the first.
One firm that is learning to live with less is Ogilvy Government Relations.
Big-name departures last year at Ogilvy caused its second-quarter revenue to drop, and the firm posted lobbying earnings of just $1.6 million.
Ogilvy has said it’s committed to being a small but strong lobby shop.
“Talking to colleagues, friends and competitors that have been at this a lot longer than I have, [there’s agreement that] this is the toughest business environment. There’s lot of factors going on. We just feel happy that we’ve been able to grow,” said Dean Aguillen, a principal at Ogilvy.
Ogilvy’s second-quarter lobbying revenue increased 9 percent over its first quarter haul.
Looking forward, many shops were hesitant to speculate about the rest of the year and what might be in store for the influence industry.
Davis at Akin Gump says activity on the committee level could provide clues about whether 2013 will end with a bang.
“If people [committee chairmen] in the position of moving stuff say they want to move stuff, there’s going to be action,” he said.
— This story has been updated.